Every day, the e-commerce industry is evolving, gaining greater clout and increasing profits. Without a doubt, it has become the most important aspect of the economy for businessmen who are looking to grow and generate revenue.
However, this growth has come with the opportunity for scammers as well. E-commerce fraud today has become a major problem all over the world.
According to Juniper Research analysis, the value of losses due to e-commerce fraud has climbed from $17.5 billion in 2020 to over $20 billion in 2021, resulting in an 18% increase in a single year. Cybercriminals and fraudsters are targeting customers as well as merchants that are inexperienced and unprepared for the market’s ongoing fraud concerns.
Therefore, consumers and merchants both must learn about the fraud and protection methods, in order to avoid big losses.
E-commerce fraud is known by many names, online fraud, payment fraud or you can also call purchase fraud. It is when a criminal or fraudster uses stolen payment information to conduct online transactions without the account owner’s knowledge on an E-commerce platform. It is accomplished through the use of fraudulent identity, stolen credit cards, and false personal card information, among other methods.
Fraud protection is a top priority for any organization as it affects the bottom line of the merchant and produces enormous negative effects.
When it comes to e-commerce fraud, your company suffers more than just revenue losses. You must also deal with the loss of client trust as well as the harm to your company’s reputation.
Each of these negative consequences – financial losses, a tarnished reputation, and a lack of trust – threatens your company’s long-term viability. The threat of e-commerce fraud is serious, regardless of the size of your business.
You need to understand the reasons for the prevailing e-commerce fraud in order to detect and prevent your business from it.
Needless to say, there are a plethora of reasons for fraud to occur in e-commerce stores. Some of them are:
Improved Technology: Fraudsters are growing more intelligent, devising new methods, and becoming more sophisticated with each passing year as everything becomes digital and AI is used. It is simple to steal data and buy information with today’s modern technologies.
Increased Distance: Scammers aren’t required to enter a store, speak to anyone, or risk being caught on store cameras. All they need is a computer and access to the Internet. With the use of online aliases and less physical presence, it has become difficult to identify and apprehend the perpetrator.
Great Ease: Before the Internet, thieves had to physically take credit cards and use them to make transactions. Breaking into people’s houses and automobiles, as well as robbing individuals on the street for credit cards, was a dangerous profession in and of itself. However, things are a lot simpler now. The dark web, in particular, has made it incredibly easy for them to acquire credit cards.
Large Evasion: In comparison to other crimes, cyber crimes are time-consuming as well as cost-effective. Moreover, cross-border invasion makes it more difficult for police to obtain evidence and prosecute criminals.
It’s when an imposter acquires and utilizes another person’s personal and financial information without permission. Consumers are not the only ones who are affected by this scam; the merchant is also affected since customers might request a refund.
Customers who believe their personal and financial information is at risk and cannot be shared on e-commerce websites or webshops are less likely to complete a transaction. A store’s reputation may suffer as a result of this.
This may be accomplished through a variety of techniques, including acquiring and hacking personal information such as passwords and security codes, phishing tactics, and so on.
Chargeback fraud happens when a shopper uses their credit card to make a purchase, receives the goods or services, and then seeks a refund from the credit card company, which is routed through the issuing bank saying it was unapproved or fraudulent. In this sort of fraud, the payment processor demands that the store repay the transaction amount to the issuing bank. The online merchant is accountable for refunding the transaction when a bank requests a chargeback.
Affiliate fraud is any illicit conduct aimed at generating commissions for affiliates. Online businesses pay affiliates a commission for sales referred to by affiliates in affiliate marketing. Affiliates are provided with a unique, trackable web link that directs customers to the merchant’s store pages. When a consumer makes a purchase after clicking on one of these links, the retailer pays the affiliate a commission for the recommendation.
In affiliate fraud, criminals use the system to defraud online merchants by creating phoney activity in order to collect commissions or boost commission amounts.
When a person uses stolen credentials to gain access to a customer’s account, this is known as account takeover fraud. A fraudster can drain monetary cash or loyalty points, steal client data, or purchase products or services once they gain access. Account takeover fraud hurts brand reputations and can permanently destroy the confidence of excellent consumers, in addition to lost money.
The dark web’s desire for stolen email addresses, passwords, and other confidential personal information have led to an increase in this sort of non-financial credentials fraud. When a fraudster figures out the proper username and password combination, they can get access to and exploit legitimate consumer accounts.
When unscrupulous actors create false internet storefronts to offer things at lower costs, this is known as triangulation fraud. The goal of the phoney store is to steal credit card information. After obtaining a consumer’s credit card information, the fraudster sends the legal transaction to the legitimate retailer. Chargebacks occur when the legitimate merchant charges the customer a second time. If the customer is unaware that their credit card information has been stolen, the fraudster may keep the stolen data and use it to make transactions elsewhere.
Fraudsters attempt to intercept a customer’s order and get products for resale through interception fraud. The fraudster will accomplish this by contacting a vendor’s customer care partner and requesting that the order’s delivery address be changed to their own. The fraudster may even contact the shipping company directly and request that a package be rerouted to a different address so that they can intercept it. To get purchase and delivery data, intercept fraud needs to take over a customer’s account.
Businesses must stay informed about current fraud trends and work with their partners and service providers to establish plans that address specific dangers as they emerge. Neglecting key procedures might increase your company’s risk of e-commerce fraud. Criminals are more likely to attack businesses and their consumers if this vital monitoring is not in place.
In order to combat fraud, you must utilize a high-quality fraud detection and management system and integrate innovative methods into your organization such as:
· Check the source of your website traffic
· Check customers who are shopping for a large number of items, that too for the first time
· Check customers who opt for quick shipment, that too in a strange area
· Be vigilant for several cards used from a single IP address
· Track sales and chargebacks
· Track customer fraud complaints
· Watch for changes in current customers’ buying behaviours
· Watch the discrepancy between the mailing address and the IP address
If the merchandise is sold to a fraudster, there is only a slim chance that the merchant would receive it back. It results in a drop in income as well as the loss of a customer.
As a result, e-commerce companies must take precautions to safeguard themselves and their consumers against fraud.
Here are some strategies for preventing fraud in the E-commerce industry.
Keep a regular eye on the functioning of your website to notice any suspicious activity like inconsistencies in billing and shipping information, as well as your customers’ actual whereabouts. Use technologies that track client IP addresses and alert you to any addresses from nations that are known to be a fraudster hotspots.
You can use the Address Verification Services that are often offered by credit card processors and issuing banks to detect suspect credit card transactions in real time and prevent credit card fraud. The Address Verification Service compares the card user’s (customer’s) billing address to the cardholder’s billing address on file with the issuing bank. This check is performed as part of the merchant’s request to the payment processor for credit card transaction authorization. When the addresses don’t match, the system either rejects the transaction for further inquiry.
Make CVV compulsive for every transaction to confirm that consumers have the physical credit card in their hands. This keeps you protected and helps to avoid fraud.
To safeguard sensitive information including client names, addresses, and credit card details, use HTTPS which is a secure version that encrypts the data. Using HTTPS protects your online store’s transactions from being broadcast in a way that hackers, thieves, and fraudsters can readily see. By purchasing an SSL certificate, you can easily use HTTPS.
Set restrictions for the number of purchases and total cash value you’ll accept from one account in a single day based on your order and revenue patterns. This reduces your exposure to a bare minimum in the event of fraud.
Depending on your goals and budget, there is a range of software solutions available to identify and prevent online fraud. Furthermore, the tools you choose may differ significantly in terms of the amount of effort required for installation and continuing administration. Some people prefer a more hands-on approach, while others prefer to leave it to the professionals.
Every order placed on your website originates from a distinct public IP address. The location or area of the world where the purchaser is making the transaction can typically be deduced from the IP address. If the city or area does not match the address on the credit card being used, then you need to be alert.
Learn more about the prevention of your E-commerce store from security breaches!
When cyberthieves discover new weaknesses to exploit, it will be critical to adopt these strategies into your e-commerce platform to safeguard it from forthcoming expensive attacks.
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